India Inc eyes Rs 10K cr from debt market

MUMBAI: Corporates are looking at raising over Rs 10,000 crore from the debt market before the Budget is announced. They are looking to avail of the adequate cash floating in the domestic market, given the restrictions on raising funds from offshore markets.

The corporate bond market has begun to witness significant activity after a two-week dry-spell. There have been four issues in the past two days, which will be mopping up close to Rs 2,100 crore. After Power Finance Corporation (PFC) hit the market with an issue of Rs 300 crore on Wednesday, HDFC, IDFC and National Capital Region Planning Board (NCRPB) hit the market with their respective issues on Thursday.

HDFC plans to raise close to Rs 700 crore, with a green-shoe option of Rs 300 crore. The bond offers a coupon of 9.20%. According to market sources, HDFC also issued Rs 300 crore to IFCI as a 10-year issuance, carrying a 9.20% coupon. IDFC is looking at raising Rs 150 crore, while the NCRPB issue is of Rs 200 crore.

This is the first series of issues hitting the market after the central bank announced its quarterly review in the end of January. Several issuers had postponed their decision to come out with bonds before the policy, in anticipation of a rate cut. There are quite a few issues that are expected to hit the market in the next two weeks, before the Budget.

Bond traders say there are other public sector undertakings and financial institutions, too, which are likely to bring out bond issues soon. The Rural Electrification Corporation and Nuclear Power Corporation of India are two of them. A few banks are also believed to be finalising tier-II issues, which could hit the market shortly.

“The liquidity is so robust that none of these issuers should have a problem in getting subscribed,” said IDBI Gilts fixed income head S Raghavan. “The main investors in these issues will be public sector companies, provident fund companies and mutual funds. With a general expectation of softness in rates down the line, there will be good gains from such issues,” he added.

According to market sources, cash-rich PSUs such as ONGC, SAIL and NTPC will be investing heavily in these issuances. “In fact, investors like HDFC and IDFC enter the market only when they have a sense of investor confidence being on a high,” said a treasury official with a private bank. Market-watchers expect this trend to subside after the Budget. “Typically, March is a month when liquidity is tight because of advance tax outflows and bond issuances will slow down,” he added.

The international credit squeeze in the aftermath of the subprime crisis, coupled with the curbs on external commercial borrowing have affected corporates who have been raising funds overseas. “The next few months will see a lot of corporates taking the debt route to raise funds, in the absence of a better alternative,” said Axis Bank treasury president Partha Mukherji.